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New Jersey – Costco Accused of Improper Sales Tax Charges

SALT Report 3866 – A New Jersey couple filed a class-action lawsuit against Costco Wholesale and several of its stores, claiming the membership-only warehouse giant has been illegally overcharging them — and potentially hundreds of thousands of other customers — by charging sales tax on toilet tissue purchases in violation of state law.

But the couple, Jacqueline Taufield and Robert Arnold, said that they were charged the tax when they purchased Charmin toilet tissue on July 26, 2015, from a Costco in Wayne, New Jersey, and then again when they picked up some more Charmin in a Costco in Hackensack five days later.

The suit said that when the Leonia couple complained to Costco management after realizing they had been charged sale tax improperly, “they refused to issue a rebate to them.”

The couple’s lawyer, Rosemarie Arnold, said, “Rather than refund [Robert’s] money, they told him, ‘Well, if you believe that, you have to mail your receipt to the corporate headquarters along with a letter and tell the corporate headquarters how you were improperly charged tax.'”

The couple was “annoyed and angry” about the charge, and that response, said Arnold, who is not related to Robert.

“The obvious solution is to say, ‘You’re absolutely right … we made a mistake, here’s your money back,’ ” the lawyer said.

The suit says that Costco “despite being aware of the illegality of their actions… continues to cheat their customers, causing them to incur monetary damages when they purchase toilet tissue.”

The claim, filed in Bergen County Superior Court, alleges violation of the New Jersey Consumer Fraud Act, breach of contract, unjust enrichment, negligence, violation of the state’s “Truth-in-Consumer Contract,” and fraud.

A Costco spokeswoman, when asked for comment on the suit, said, “Unfortunately, we are not able to provide a response at this time.”

Arnold, the plaintiffs’ lawyer, said the amount of tax charged improperly in the couple’s case is less than $1.50 in each purchase.

But nonetheless, Arnold said, “I think it’s huge problem” for Costco and its customers because of the likelihood that the couple were not the only ones subject to the incorrect tax charging.

Costco has 19 warehouse locations in New Jersey, according to the company’s website. And the suit says the class of potentially affected customers is more than 100,000 people.

Arnold said the potential damages for the class would be in the “millions of dollars.”

“Everybody uses toilet paper,” Arnold said. “You have to figure that a patron of Costco is always going to buy toilet paper.”

The lawyer also said it’s an open question of whether Costco “is actually paying the taxes to the government, or keeping the money?”

“Most likely, it’s the latter, because if they submitted tax resolutions to the government, the government would say, ‘This is an non-taxable item, it’s toilet paper,’ ” Arnold said.

A spokesman New Jersey’s Treasury Department, which oversees tax regulations, declined to comment on the lawsuit. But the spokesman noted that “large chain stores have point-of-sale cash registers that are programmed to charge sales tax on a variety of items.”

The spokesman also noted that the department does investigate complaints about stores improperly collecting or not collecting sales tax, and that anyone can file such a complaint anonymously.